Caixin
Apr 20, 2018 05:32 PM
FINANCE

China Orient Sells 20% Stake to Shore Up Capital

China Orient Asset Management Corp.’s sale of a 20% stake has lifted the company’s capital-adequacy ratio to 14.3%. Photo: VCG
China Orient Asset Management Corp.’s sale of a 20% stake has lifted the company’s capital-adequacy ratio to 14.3%. Photo: VCG

China Orient Asset Management Corp., the country’s third-largest distressed-debt manager, said it has sold a nearly 20% stake to strategic investors in a pre-initial public offering (IPO) funding round so it can meet capital adequacy requirements.

The four strategic investors are the National Council for Social Security Fund, China Telecom Corp. Ltd., China Reform Capital Corp., and Shanghai Electric Group Co. Ltd., China Orient Board Secretary Chen Jianxiong said at a news conference on Thursday. Chen said the four investors have invested a total of about 18 billion yuan ($2.9 billion).

Regulators approved the plan in February, he added.

China’s distressed-debt managers, which buy up toxic assets to reduce risks in the financial system, have been looking into public listings and other means to boost capital so that they can take on more debt as the country moves ahead with a financial deleveraging campaign.

“The total stake of the four strategic investors consists of less than 20% of the company, and is distributed relatively equally, at around 2% to 6% each,” said Jiang Yueming, general manager of China Orient’s chairman’s office.

The investment brought up the company’s capital-adequacy ratio to 14.3%.

New guidelines released in December by the country’s banking regulator reiterated that the parent company of each of the big four national asset management companies, including China Orient, should have a capital-adequacy ratio of at least 12.5%. The rules also stated that each asset management company’s (AMC’s) core capital-adequacy ratio must be at least 9% and its tier-one capital-adequacy ratio must be above 10%.

The big four AMCs have rapidly expanded their total assets over the past few years. In 2017, China Orient’s total assets surged 21.7% to 980.3 billion yuan, according to Liu Bo, general manager of China Orient’s operations management department.

The company plans to gather 100 billion yuan to invest in nonperforming loans this year, Liu said.

Contact reporter Leng Cheng (chengleng@caixin.com)

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